investors in Scottsdale, Arizona, help with deal analysis
I've been given the opportunity to rental arbitrage a 4 bedroom house, 3 bathroom, 2 kitchen and living area home in Old Town, Scottsdale, AZ. The rent is $3450 with landscaping and pest control included. I would have to be responsible for other utilities. There is no pool BUT there is a putting green in the backyard. As I am searching online, it looks as if it's very hard to get bookings for AZ. According to airdna, the unit will rent out for $400 but when I check on airbnb, there is a LOT of competition and these places look amazing with a lot more amenities like a pool/hot tub renting out for the same price.. while I believe that my unit has A LOT of potential, I am a newbie and am getting concerned that I will lose money on this deal. I live in NY so will be managing remotely. Is this a good deal and what can I do to minimize risk?
It depends on what the location is in Old Town. When does the lease start? Spring training and close to the Giants stadium could be a big win for you. Are you familiar with all the new rules with Scottsdale Airbnb's? I lived in Old Town for 11 years and just moved. Had an Airbnb there as well.
Quote from @Brandon LaVallee:
It depends on what the location is in Old Town. When does the lease start? Spring training and close to the Giants stadium could be a big win for you. Are you familiar with all the new rules with Scottsdale Airbnb's? I lived in Old Town for 11 years and just moved. Had an Airbnb there as well.
I'm aware that you have to register for a license to operate as a short term rental. It's not too far from the Scottsdale stadium. It's near Vista del Camino park. The lease starts next week after I sign the contract. How did you do with your airbnb? Would you recommend it?
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Sounds like too big a risk IMHO. I think arbitrage is too big a risk most of the time unless you have plenty of cash to cover the lease in case of problems.
AirBNB is a platform, you would have a Short Term Rental.
I live in the area and STR's are a dime a dozen. I live next door to a very high end STR and this year the occupancy was far less than the year before. The owner actually has put it up for long term lease from June-December with no bites yet. Also, without a pool I wouldn't count on any summer guests.
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Run the numbers hard and good to see if this would pencil out for you. Also, if the underwriting does not show that your net profit in 6 months is the same amount that you put into the property to get it up and running, don't do it!
Scottsdale is definitely saturated with STR's currently. I have a couple of STR's in Scottsdale & occupancy has decreased the last 2 years with all the competition. Also, with the property having no pool, occupancy in the summer is going to be pretty bad or you are going to have to drop pricing significantly from June through August. Feel free to DM me and I am happy to give you a better analysis on the property from my perspective, but from what you have said I would most likely pass on the deal.
@Gabriella Borukhov I tend to agree with the comments here that this deal might not be a good idea. I would also like to add that rental arbitrage is not real estate investing, it’s owning a business in real estate, you would not actually own the real estate, so you would not get any of the benefits that go along with owning real estate, such as depreciation, loan pay down, and appreciation. Don’t get me wrong if you do rental arbitrage well you can make good cash flow, but it’s a business, it’s not real estate investing. The real estate inventor here is the landlord that you would be paying rent to. I hope this is helpful and I encourage you to look into buying a property to run your short term rental business out of, the long term benefits of owning are much greater than the possibility of the short term cash flow from renting.
Quote from @Gabriella Borukhov:I did well, I didn't do the best job of maximizing the spring training months. Summer is definitely slower. I do recommend it. Here is my referral link if you are not a host yet - https://www.airbnb.com/r/brand...
Quote from @Brandon LaVallee:
It depends on what the location is in Old Town. When does the lease start? Spring training and close to the Giants stadium could be a big win for you. Are you familiar with all the new rules with Scottsdale Airbnb's? I lived in Old Town for 11 years and just moved. Had an Airbnb there as well.
I'm aware that you have to register for a license to operate as a short term rental. It's not too far from the Scottsdale stadium. It's near Vista del Camino park. The lease starts next week after I sign the contract. How did you do with your airbnb? Would you recommend it?
Also here is a link to all the things you need to do outside of registering. https://www.scottsdaleaz.gov/c...
Scottsdale has a ton of STR's and they have new rules governing them.
Don't do it! No pool is a huge issue and once you factor in furnishings, utilities etc you'll be lucky to break even in 2 years. You also need someone who lives within an hour drive of the property. I cohost two very Nice properties in OT, there's so many STR's that are going LTR right now, especially ones without pools.